Citrix Systems (CTXS, Financial) is well-positioned this year to deliver handsome returns to shareholders. Its capital allocation strategy focuses on streamlining its investments in order to drive a long-term growth for its business and return attractive capital to its shareholders. Also, Citrix System is expected to buy back a large number of shares this year as against last year through both the structured program as well as from the open market based on the market conditions. The company repurchased approximately 20.8 million shares in the second-quarter of 2014.
In addition, the company is experiencing a solid growth momentum in its networking, data sharing and mobile platform businesses that should drive its top as well as bottom line performance in the current quarter. Also, its cost control measures across its entire product portfolio should enhance its productivity and increase its profitability, while acquiring new clients at its fold.
The company recently launched XenApp for various devices such as mobile, desktop or Thin Client devices, which is a new market standard for window virtualization. This new addition of 7.5 to the window virtualization is expected to effectively control lexCast Management Architecture and will reduce the cost and complication of virtualizing 5 generation of windows app.
Expecting traction ahead
Interestingly, the XenApp serves as a base technology that helps the Citrix’s service providers, and developers to offer Apps and Desktop as a service to their customers. There are approximately 360,000 users worldwide who are exploiting its XenApp technology and availing Apps and Desktop as a service. The company is really excited about this fast growing market segment that should drive sales for its subscription business.
The subscription business now represents about 10% of its app and desktop license mix that has grown more than 50% year-on-year basis. Citrix System believes that its XenDesktop, XenApp and XenMobile to certainly drive growth for its Apps and Desktop as a service category in the future. Earlier Citrix System had integrated its AppDNA capabilities in order to minimize cost and complications of migrating from physical to virtual.
The company remains on track to bring innovative products for its clients across the world. Citrix during the first quarter had developed an innovative Citrix cloud platform that should support its hybrid cloud provisioning in a better and efficient manner. This innovative cloud platform is also expected to enhance data center flexibility, assist in disaster recovery, burst capacity and many other businesses. Also, its communications cloud that offers services such as GoToMeeting is gaining traction in the market and accounting 60% to its SaaS business.
GoToMeeting is growing at a growth rate comparable to mid-teens year-on-year basis. Citrix System expects its GoToMeeting service to enhance growth for its SaaS business in the long-run. Moreover, the company is also seeing a growing momentum in its ‘Documents Cloud’ that continues to carry high demand from enterprise customers. Document Cloud also empowers the IT to provide vigorous sharing and synchronize services and data security solutions to enterprise customers.
Expecting better performances
Citrix System for the third quarter 2014 anticipates revenue in the range of $765 million to $775 million and its bottom line is expected to range between $0.70 earnings per share to $0.73 per share. The analysts have been modeling earnings of $0.76 per share on the revenue of $785.80 million for the third-quarter 2014.
All-in-All the company is performing fairly well against the big competitors such as Microsoft (MSFT). In addition, the company is anticipating its revenue for the full year to grow approximately 8.5% to 10%, while the analysts forecast revenue growth of 9.4% for the full year. Also, it sees its earnings per share to range between $3.20 and $3.25 per share for the full year, which is well ahead from the $3.0 earnings per share estimated by the consensus.
Conclusion
Citrix System is currently trading at the trailing P/E multiple of 39.75 and forward P/E multiple of 18.81 that reflects fair valuations for the stock that has plenty of rooms to grow in the future. Also, its PEG ratio of 1.76 for the next five years continues to support its growth prospects in the future. In addition, the analysts have estimated CAGR of 12.28% for the next five years that indicate sound growth potential for the company in the coming years. The analysts also see CAGR of 7.30% this year and 15.10% for next year, respectively, that increase its chances of yielding returns.
